Death, Taxes and AI: IRS adopts new tech for fraud detection as 95% of US companies embrace automation

The IRS is increasingly integrating artificial intelligence into its operations, from call centers to fraud detection systems, as part of a broader technology transformation following pandemic-related challenges. This shift reflects a wider trend where 95% of U.S. companies now use generative AI, marking a significant evolution in how both public and private sectors leverage automation for core functions.

The big picture: Danny Werfel, former IRS Commissioner and current strategic advisory board member at alliant, describes AI as presenting both “an opportunity and a risk” for tax administration, with the agency expanding from initial call center applications to chatbots and scam detection systems.

• The IRS began implementing AI solutions after the challenging 2022 tax season, when COVID-19 backlogs and reduced office capacity made traditional taxpayer services nearly impossible.
• Technology adoption accelerated as a practical solution to operational constraints, with AI helping manage increased service demands.

What you should know: AI integration extends beyond government agencies into everyday financial services that taxpayers already use without realizing it.

• Virtual assistants like Siri, spam filters, autocorrect, and personalized recommendations all rely on AI technology that consumers encounter daily.
• Tax and accounting firms are increasingly incorporating AI tools into their service offerings and internal operations.

Key statistics: Generative AI adoption has surged dramatically across American businesses in recent months.

• 95% of U.S. companies now use generative AI, representing a 12% increase in just over a year, according to Bain & Company, a global consulting firm.
• This adoption spans both public and private sectors across all industries, not just technology companies.

Why this matters: The IRS’s AI implementation signals a fundamental shift in how government agencies deliver services and manage operations.

• Technology solutions are becoming essential for handling increased service demands while maintaining operational efficiency.
• AI adoption in tax administration could improve taxpayer experiences while helping detect fraudulent activities more effectively.

What’s next: The IRS continues expanding AI applications beyond initial implementations, with ongoing development in taxpayer assistance and fraud prevention systems.

• The agency is exploring additional AI use cases while balancing operational benefits with security considerations.
• Private sector AI adoption suggests continued growth in technology integration across all business sectors.